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Rise Life revises private placement in Scientus deal

2020-04-21 13:12 ET - News Release

Mr. Scott Secord reports


Rise Life Science Corp. entered into a binding letter agreement dated April 13, 2020, with HydRx Farms Ltd., operating as Scientus Pharma, to complete a business combination of Rise and Scientus. If completed, the transaction will constitute a fundamental change of Rise pursuant to the policies of the Canadian Securities Exchange. The resulting issuer that will exist upon completion of the transaction will continue to operate under the name Rise Life Science until a revised branding strategy is finalized.

Pursuant to the terms of the agreement, Rise shall issue to shareholders of record of Scientus $25-million in common shares at a price of five cents per common share, which will be exchanged for shares of the resulting issuer upon completion of the transaction.

The final structure of the transaction will be determined by the parties following receipt of tax, corporate and securities law advice. The transaction is an arm's-length transaction. Upon the closing of the transaction, it is expected that current shareholders of Rise (after the conversion of the outstanding Rise convertible debentures, discussed herein) will hold approximately 19 per cent of the resulting issuer shares, existing shareholders of Scientus will hold approximately 67 per cent of the resulting issuer shares and the new convertible debenture holders, as a result of the private placement financing (described herein), will hold approximately 14 per cent on a fully converted basis.

Closing conditions

The completion of the transaction is subject to a number of conditions, including but not limited to the following:

  • Approval of the transaction by the shareholders of Rise and Scientus;
  • Approval of the transaction by the CSE;
  • Successful completion by Rise of a minimum $5-million private placement financing (described herein);
  • Conversion of all outstanding Rise convertible debentures;
  • Assignment or retirement of current outstanding debenture held in Scientus.

Escrow release conditions

Upon the satisfaction of the following conditions, to be completed within 180 days from the date of closing, the escrow agent shall release the escrowed funds (defined herein) to the company:

  • All current outstanding debt, not including trade payables, of the company shall be exchanged for resulting issuer shares based on a conversion price of 7.5 cents per share;
  • All current interest payable by Rise shall be exchanged for resulting issuer shares based on a conversion price of five cents per share;
  • Written confirmation from Rise that there are no continuing debt obligations, not including trade payables, or interest-bearing liabilities associated with the company;
  • Written confirmation from each of the company and Scientus that all conditions to the completion of the transaction have been satisfied or waived, including the assignment and amendment of the Scientus debt (as defined herein), other than the release of the escrowed funds;
  • The receipt of audited financial statements of Scientus for the years ended Dec. 31, 2018, and Dec. 31, 2019;
  • The resulting issuer shares being approved for listing on the CSE;
  • The receipt of all regulatory, shareholder and third party approvals, if any, required in connection with the transaction.

Rise private placement

As a condition to the transaction, Rise intends to complete a brokered private placement, led by Canaccord Genuity Corp., of subscription receipts for targeted gross proceeds of up to $10-million that will be automatically exercised into convertible debenture units of Rise (at which time the net proceeds of the private placement are released to the company) upon the satisfaction of the escrow release conditions. Each Rise unit comprises one $1,000 principal amount unsecured convertible debenture and 20,000 common share purchase warrants. Rise convertible debentures will be convertible into common shares of Rise, at the sole discretion of the holder, at a conversion price of five cents per common share, at any time for a period of 36 months from the satisfaction of escrow conditions. Rise convertible debentures will bear 12-per-cent interest per annum payable semi-annually, 6 per cent paid in cash and 6 per cent paid in Rise common shares based on the market price of the common shares at the time of payment and in accordance with CSE regulations. Each warrant exercises into one common share at an exercise price of seven cents for 24 months from satisfaction of the escrow release conditions. The agent will receive a cash commission equal to 8 per cent of the gross proceeds raised in the offering and such number of broker warrants that is equal to 8 per cent of the number of Rise units expiring three years following the closing date of the private placement. The gross proceeds of the private placement, less 50 per cent of the agent's commission and all of its estimated expenses of the private placement, shall be placed into escrow with a third party escrow agent, to be released to the company upon satisfaction of the escrow release conditions. The net proceeds of the private placement will be used for general working capital purposes.

Rise debenture conversion

As a condition of the transaction, all current debentures in Rise totalling $5,365,000, upon closing of the transaction, must be converted into common shares of Rise at a conversion price of 7.5 cents per common share. The outstanding warrants issued in connection with the current outstanding debentures of Rise (including bonus warrants issuable upon exercise of such warrants) will have their exercise price amended to five cents but must be exercised within 30 days of closing of the transaction. In addition, outstanding interest owed to debenture holders up to April 30, 2020, will be paid in kind in Rise common shares at five cents per share.

Scientus debenture assignment or retirement

In connection with the transaction, the holder of an outstanding $11.5-million principal amount senior secured convertible debentures and accrued interest of Scientus has agreed to assign the Scientus debt to a third party for cash consideration of $6-million, subject to final documentation customary for transactions of this nature. The third party has entered into an agreement with Scientus to concurrently reduce the principal amount of the Scientus debt to $7.5-million and extend the maturity date from Nov. 12, 2019, to the date that is 24 months from the completion of the transaction. The first-priority security interest of the Scientus debt shall be assigned to that third party and all obligations of the Scientus debt will become obligations of the resulting issuer.

Further information

Further details about the transaction and the resulting issuer will be provided in a comprehensive news release when the parties enter into a definitive transaction agreement.

About Rise Life Science Corp.

Rise is currently developing and evolving medical and adult-use hemp-based formulations to create general-use health and well-being products for the emerging consumer category made possible by the legalization of hemp in the United States pursuant to the Agricultural Improvement Act of 2018. The company launched its cannabidiol-based sexual wellness products in June, 2018.

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